This section will comprehensively cover five tried and tested investment strategies you can use to venture into the Bitcoin Cash market. As you will see, they differ depending on the investor's objectives and the goal they are trying to achieve.
1. Buy and 'Hodl' What is it?
‘Hodl’ is part of the crypto vernacular and it means to ‘hold’. It originated as a misspelling in a rant published online by a Bitcoiner, and the term remains popular in the community today. The strategy is as simple as it sounds: you buy Bitcoin Cash and hold it for a long time.
If you look at crypto charts, which show detailed digital asset performance over time, you will realize the price of coins such as BCH has grown steadily, thanks to increased awareness among the masses. Many expect this to continue as more people around the world embrace cryptocurrencies. Therefore, at around $500 today, Bitcoin Cash may seem like a bargain a few years from now.
What is the benefit of using this strategy?
There are several benefits to using this strategy. If you believe in Bitcoin Cash as a project, and see a future where it is widely adopted, then this is the easiest way to gain exposure. Additionally, you don't have to worry about short-term price volatility, which often scares off new investors. You don’t need to execute a perfectly timed trade either: wait for the price to explode further down the line. This makes ‘buy and hodl’ a great strategy for investors who don’t have the time to watch the market for the perfect entry and exit point.
2. Day Trading What is it?
One trademark of the crypto market is its high volatility, which can be a blessing and a curse. It's not uncommon to see the price of a given cryptocurrency make wild swings daily. Double-digit movements are commonplace, and this offers traders the perfect environment to profit from their investments. This strategy involves buying and selling BCH within short periods, usually less than a day, thereby benefiting from the resulting price difference. Here you profit often, even daily, based on price volatility, instead of holding the asset for long-term gains.
What is the benefit of using this strategy?
Like any other investment strategy, day trading has its perks, such as making good returns within a short period. Also, you don't have to worry about owning and safeguarding your tokens using a wallet. And on some trading platforms, you can copy and learn from experts to make the most of the endeavor.
Successful day traders will use risk management strategies, such as stop loss and take profit limits, to limit their downside. According to your risk tolerance, you can set profit targets and loss limits that will automatically close trades when they are reached.
3. Shorting What is it?
Shorting is a strategy you can use if you expect the price of BCH to fall. In this case, a broker will lend you some Bitcoin Cash, let’s say one coin. You sell that coin on the market for $500 straight away. Later, the price of BCH falls, and you repurchase one coin for $400. You then return the coin you borrowed to the broker, cancelling your debt, and keeping the difference of $100 as profit.
Timing is crucial to make the most of this strategy. You can aid your strategy by learning how to read charts and following the latest developments that are likely to influence the movement of BCH. Remember that if the price of BCH goes up, not down, you will lose out.
What is the benefit of using this strategy?
Shorting has many benefits. Firstly, it allows you to protect your BCH investment against a drop in price. Even if the price falls, a short position will allow you to make a profit. Using a broker that offers CFDs or futures will also allow you to speculate on a negative price movement without having to actually own any Bitcoin Cash. Many brokers also offer leverage, which can help to maximise your profits.
4. Using a Trading Bot for Trading What is it?
Bitcoin Cash trading bots exist to simplify investing in cryptocurrencies for all, regardless of skill level. If you come across a reputable trading bot and lack the expertise to trade profitably on your own, don't hesitate to use it. Bots are not only for new traders, but also for experienced individuals that would like to automate some of the arduous tasks involved in regular trading. You can invest in BCH using a bot by joining a reputable platform supporting the bot and sitting back and watching as it simplifies your trading.
What is the benefit of using this strategy?
Trading bots are excellent because they level the playing field for all traders, no matter the level of expertise. They save time since they require a few minutes each day to adjust your trading strategy, and also offer potentially higher returns since excellent bots have a high success rate. Bots are built using sophisticated algorithms and integrated with AI, which allows them to collect vast amounts of Bitcoin Cash market data, decode it, and make lightning-fast predictions on the likely direction BCH will take. Most importantly, a bot will help you earn passively.
5. Hedging Bitcoin Cash What is it?
Hedging involves opening trading positions t hat cover the gains or losses of another position. In our case, it's possible to rely on CFDs, shorting, and futures to hedge our Bitcoin Cash investment. If we are holding BCH, we can open a short position to protect against a market crash, or alternatively if the price is in an uptrend we can sell BCH futures to guarantee a profit.
What is the benefit of using this strategy?
Hedging Bitcoin Cash has many perks. It will help you secure your capital, ensuring your initial trading position doesn't lead to any financial loss. Also, it does help manage your risk, thereby maximizing your profit potential with limited downside. Additionally, it can help cover the price movements of BCH, reducing the stress of holding such a volatile asset.
SOURCES
https://www.bitdegree.org/crypto/tutorials/bitcoin-cash-vs-bitcoin
https://www.investopedia.com/managing-wealth/basic-investment-objectives/
https://www.investopedia.com/terms/h/hodl.asp
https://www.investopedia.com/terms/b/bitcoin.asp
https://www.toptal.com/finance/market-research-analysts/cryptocurrency-market
Great article here! Good explanation of various strategies in investing BCH in 2021!